In the early days of the energy transition, there were widely held views that, in order to achieve new net-zero and other climate-related commitments set by many companies—objectives that derive from ambitious Nationally Determined Contributions of countries in support of the Paris Agreement’s goals for reducing greenhouse gas (GHG) emissions and adapting to climate impacts—it would be necessary to rapidly and precipitously transition away from reliance on fossil fuels. Several factors have demonstrated that a hasty shift away from fossil fuels towards renewable energy sources will be far more challenging than initially anticipated.
Firstly, many countries are realising that reducing reliance on fossil fuels has to be balanced against ensuring the security and reliability of energy supplies, which many believe to be of paramount significance. Political events, such as the disruption of Russian gas supplies to Europe, dramatically illustrate the risks associated with energy security and the benefits of a multi-faceted approach.
Secondly, the cost, reliability, technical and regulatory issues associated with switching to renewable energy and alternative fuel sources, compared with continued use of conventional energy, create obstacles to a quick transition to these new energy sources. In many cases, these alternatives are economically viable only with substantial governmental incentives, and there is a growing realisation that the pace of the energy transition will differ by region.
Thirdly, and directly related to the first two points, the top priority of many emerging market countries is to improve the economic conditions of their citizens. Consumers in developing countries may be less willing to adjust their energy use or volunteer to pay a ‘green premium’ for renewable energy. It seems highly unlikely that, given this goal, many of these countries, particularly those with substantial fossil fuel reserves (such as Bangladesh or Indonesia), can be convinced to forgo readily accessible and relatively inexpensive fossil fuel sources of energy in favour of more expensive and less reliable alternative fuel sources.
Finally, in addition to producing energy, fossil fuels are critical for the production of other essential products such as plastics, fertilisers, personal care products, pharmaceuticals and medical devices. Demand for these essential products will remain high until affordable and reliable alternatives are developed to facilitate an orderly product transition.
Future fuels
In light of all of the considerations above, it seems clear that some significant degree of continued fossil fuel use is inevitable for many years to come. Based on this analysis, and given the net-zero goals that have been widely accepted, there needs to be a higher degree of focus on methods of using fossil fuels in a more environmentally friendly manner. These measures broadly fall into three categories:
1. Transition to cleaner forms of fossil fuels: Global demand for electricity is rising. A key to reducing GHG emissions is the development of cleaner methods of electricity production, particularly through the shift from coal to natural gas, including through expanded use of LNG to transport gas from countries with excess gas supplies to countries with vast energy needs but relatively small amounts of indigenous gas reserves. This is particularly important in the context of countries such as China, which continue to use coal as a major source of energy generation.
2. Promotion of CCS: Many companies have made substantial investments in CCS projects to achieve net-zero goals and to reduce the environmental effects of the production and use of fossil fuels. Even with the support of significant government incentives, CCS projects face certain technical and economic challenges for scalable development. The emergence of voluntary carbon markets, which provide an additional means for monetising carbon removal and emissions reduction projects such as CCS, is viewed as an important component of the global effort to mitigate climate change.
3. Improved energy regulatory regimes: Governments in some of the world’s largest economies have introduced programmes that offer a range of incentives—including tax credits, federal grant programmes and government-backed loans—to promote the ‘greening’ of fossil fuels and accelerate the energy transition. CCS projects qualify for many of these incentives, yet the permitting timelines for CO₂ injection wells remain a challenge for project developers and a burden to industry efforts to lower the emissions profile of fossil fuels.
The streamlining of permitting programmes by governments has the potential to unlock investment in CCS and other energy transition technologies. In addition, regulations addressing such areas as energy efficiency, environmental protection and community engagement promote a focus by industry to continuously improve on the production of energy from fossil fuels in cleaner and safer ways. Federal regulations in the US apply a particular focus on the management and reduction of methane emissions in oil and gas development.
In some quarters, there has been an effort to demonise the use of fossil fuels, given their impact on climate, biodiversity and the environment. These efforts ignore the undeniable benefits that fossil fuels have and continue to provide in terms of providing readily accessible, secure and relatively inexpensive sources of energy to power homes and communities, fuel economic growth, and produce essential products.
To achieve net-zero goals, the reality is we will need an ‘all of the above’ strategy that includes increased transition to non-fossil fuels, as well as greener use of fossil fuels. All of these energy sources should be viewed as essential components of a successful energy transition.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
Jay Cuclis and Taylor Pullins are both partners at White & Case LLP.
This article is taken from Outlook 2025, our annual publication examining the year ahead in energy. Subscribers can click here to read their free copy. The publication can also be bought from our store here.
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